Effective Oct. 28, 2004, the Check Clearing for the 21st Century Act (“the Act”) improves the ability of banks to use electronic images of paper checks by, for example, submitting those images, along with associated information, for electronic processing. Under the Act, if a receiving financial institution (“RI”) or its customer requires a paper check, a paper image replacement document (“IRD”), such as a paper “substitute check,” may be created from an electronic check image and associated electronic information. Under the Act, a substitute check meeting specified requirements is the legal equivalent of an original paper check, and an RI is required to accept the substitute check for payment. This process enables banks to reduce the costs and inconveniences associated with physically handling and transporting original paper checks.
The terms “substitute check” and “IRD” generally are used interchangeably herein to refer to any electronic or paper document that can be used for electronic payment processing purposes, whether or not the document is the legal equivalent of a paper check negotiable instrument. The terms “bank” and “RI” generally are used herein to refer to any party performing conventional or electronic check processing at any stage, including depositing and receiving institutions, their non-bank subsidiaries and affiliates, and any non-bank third party agents that provide processing services to banks.
Typically, each electronic check is received for processing in an electronic file, which includes one or more electronic image cash letters (“ICLs”). Each ICL includes one or more bundles of items (checks) to be processed. Each ICL can comprise forward items and/or return items. Upon receipt, the electronic file and each ICL and item contained therein proceed through a number of electronic check processing points. For example, the electronic processing points typically include: (1) verifying the format and/or contents of the electronic file; (2) identifying an RI for each item in the file; (3) aggregating the items by RI into at least one new, outgoing ICL for each RI; and (4) presenting each outgoing ICL to its corresponding RI via electronic or paper means. Typically, items from a particular incoming ICL are presented in multiple different outgoing ICLs.
At any electronic processing point, an ICL and/or an item may fail to process correctly. For example, during presentment of an outgoing ICL, an item may fail to print. To date, banks have been unable to monitor ICLs and items during electronic processing. In particular, banks have been unable to determine the processing status of each ICL and item therein, including whether each ICL and item was processed correctly, and if not, at which processing point it failed. Thus, banks have been unable to determine whether each item in each incoming ICL has been presented in a corresponding, outgoing ICL.
Oftentimes, such inability forces banks to process particular items multiple times. For example, where an RI has not received a particular item within a certain timeframe, the RI may request reprocessing of the item. Because the RI and the processing bank cannot determine whether the item has failed to process, or rather, is still processing, the banks typically assume that it failed to process. If the banks' assumption is incorrect, the item is needlessly reprocessed, wasting resources and creating confusion when both items ultimately are presented to the RI.
In the traditional, paper processing arena, each check could be seen and touched throughout processing. Determining whether a check was processed or identifying the current stage of processing for a particular check simply required looking in trays in various bank processing stations. Because Check 21 processing takes place electronically, banks do not have physical points at which they can make such determinations.
Thus, a need exists in the art for monitoring electronic ICLs and items during electronic check processing. Specifically, a need exists in the art for determining whether each ICL and item processed correctly, and if not, at which processing point it failed. In addition, a need exists in the art for balancing each incoming ICL by determining whether each item in the incoming ICL has been presented in a corresponding, outgoing ICL. A further need exists in the art for determining whether each item in a particular outgoing ICL has been processed multiple times.